TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Repurchase Agreements (Notes)

Repurchase Agreements (Notes)

9 Months Ended

Sep. 30, 2015

Disclosure of Repurchase Agreements [Abstract]

As of September 30, 2015, the Company had outstanding $8.0 billion of repurchase agreements. Excluding the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 0.87% and weighted average remaining maturities of 57 days as of September 30, 2015. As of December 31, 2014, the Company had outstanding $12.9 billion of repurchase agreements, including repurchase agreements funding the Company’s U.S. Treasuries of $2.0 billion. Excluding the debt associated with the Company’s U.S. Treasuries and the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 0.72% and weighted average remaining maturities of 64 days as of December 31, 2014. As of December 31, 2014, the debt associated with the Company’s U.S. Treasuries had a weighted average borrowing rate of 0.23%. The Company did not have any repurchase agreements collateralized by U.S. Treasuries as of September 30, 2015.

At September 30, 2015 and December 31, 2014, the repurchase agreement balances were as follows:



(in thousands)	September 30, 2015		December 31, 2014
Short-term	$	7,982,928	$	12,839,242
Long-term	—		93,221
Total	$	7,982,928	$	12,932,463

At September 30, 2015 and December 31, 2014, the repurchase agreements had the following characteristics and remaining maturities:



	September 30, 2015
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency RMBS ⁽¹⁾			Agency Derivatives			Residential Mortgage Loans Held-for-Sale			Commercial Real Estate Loans Held-for-Investment			Total Amount Outstanding
Within 30 days	$	2,717,900		$	579,474		$	19,900		$	—		$	22,855		$	3,340,129
30 to 59 days	1,882,319			521,160			20,868			—			—			2,424,347
60 to 89 days	—			15,609			—			—			—			15,609
90 to 119 days	528,128			440,772			40,298			—			—			1,009,198
120 to 364 days	724,100			418,310			42,680			8,555			—			1,193,645
Total	$	5,852,447		$	1,975,325		$	123,746		$	8,555		$	22,855		$	7,982,928
Weighted average borrowing rate	0.52		%	1.86		%	1.15		%	2.71		%	2.01		%	0.87		%



	December 31, 2014
	Collateral Type
(in thousands)	U.S Treasuries			Agency RMBS			Non-Agency RMBS ⁽¹⁾			Agency Derivatives			Residential Mortgage Loans Held-for-Sale			Total Amount Outstanding
Within 30 days	$	998,750		$	2,305,726		$	630,118		$	44,723		$	—		$	3,979,317
30 to 59 days	—			3,568,049			945,032			82,344			—			4,595,425
60 to 89 days	—			631,992			260,228			11,066			—			903,286
90 to 119 days	—			317,155			117,395			—			—			434,550
120 to 364 days	—			1,635,650			278,401			—			15,113			1,929,164
Open maturity ⁽²⁾	997,500			—			—			—			—			997,500
One year and over	—			—			93,221			—			—			93,221
Total	$	1,996,250		$	8,458,572		$	2,324,395		$	138,133		$	15,113		$	12,932,463
Weighted average borrowing rate	0.23		%	0.42		%	1.79		%	0.99		%	3.03		%	0.64		%

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(1)	Includes repurchase agreements collateralized by retained interests from the Company’s on-balance sheet securitizations, which are eliminated in consolidation in accordance with U.S. GAAP.


(2)	Includes repurchase agreements collateralized by U.S. Treasuries with an open maturity period (i.e., rolling 1-day maturity) renewable at the discretion of either party to the agreements.

The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of repurchase agreements:



(in thousands)	September 30, 2015		December 31, 2014
Available-for-sale securities, at fair value	$	8,532,509	$	11,874,783
Trading securities, at fair value	—		1,997,656
Residential mortgage loans held-for-sale, at fair value	9,677		19,123
Commercial real estate loans held-for-investment	45,651		—
Net economic interests in consolidated securitization trusts ⁽¹⁾	399,001		363,564
Cash and cash equivalents	15,000		14,117
Restricted cash	118,958		112,435
Due from counterparties	28,813		32,495
Derivative assets, at fair value	170,856		185,067
Total	$	9,320,465	$	14,599,240

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(1)	Includes the retained interests from the Company’s on-balance sheet securitizations, which are eliminated in consolidation in accordance with U.S. GAAP.

Although the transactions under repurchase agreements represent committed borrowings until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls.

The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at September 30, 2015 and December 31, 2014:



	September 30, 2015							December 31, 2014
(dollars in thousands)	Amount Outstanding		Net Counterparty Exposure ⁽¹⁾		Percent of Equity		Weighted Average Days to Maturity	Amount Outstanding		Net Counterparty Exposure ⁽¹⁾		Percent of Equity		Weighted Average Days to Maturity
Royal Bank of Canada	$	1,213,331	$	325,870	9	%	60.9	$	1,373,549	$	401,194	10	%	83.8
Barclays Capital Inc.	716,166		261,723		7	%	43.0	1,346,085		365,879		9	%	50.5
All other counterparties^{(2) (3)}	6,053,431		753,256		20	%	57.6	9,215,329		907,066		22	%	57.7
Total	$	7,982,928	$	1,340,849				$	11,934,963	$	1,674,139

____________________

(1)

Represents the net carrying value of the securities, residential mortgage loans held-for-sale and commercial real estate loans held-for-investment sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. Payables due to broker counterparties for unsettled securities purchases are not included in the amounts presented above. However, at both September 30, 2015 and December 31, 2014, the Company did not have any such payables.


(2)	Excludes $997.5 million of repurchase agreements collateralized by U.S. Treasuries with a rolling 1-day maturity as of December 31, 2014.


(3)	Represents amounts outstanding with 19 and 23 counterparties at September 30, 2015 and December 31, 2014, respectively.

The Company does not anticipate any defaults by its repurchase agreement counterparties. There can be no assurance, however, that any such default or defaults will not occur.